BENEFITS OF REAL ESTATE INVESTING

Real estate investing can be a highly profitable activity for many people. This is especially the case if you are willing to hold onto property for an extended period of time, to take advantage of property appreciation. However, it is also possible to go wrong in this area and lose your investment. The following discussion of the pros and cons of real estate investing clarifies the benefits and risks associated with this important asset class.

1. Real Estate Can Be Purchased at Below-Market Prices

It is sometimes possible to acquire real estate at a below-market price – especially when the seller needs to sell quickly, and you have sufficient cash on hand to fill this need. Taking advantage of these anomalies requires a deep knowledge of local market prices, which is easier to obtain when you commit to real estate investing on a full-time basis. Real estate agents are especially good at locating properties that are available at below-market prices.

2. Real Estate Generates Steady Cash Inflows

When a property is currently being rented out, it generates a stream of monthly rent payments. Some properties may have additional payments associated with them, such as for washers and dryers, storage, and parking. Depending on the offsetting cash outflows for mortgage payments, property taxes, maintenance, and so forth, the net cash inflows may be substantial.

3. Real Estate Provides a Depreciation Tax Shield

The depreciation expense that can be claimed on a real estate investment involves no cash outflow, and yet reduces the amount of taxable income – thereby shielding you from a portion of the taxes that would otherwise be due. Currently, the depreciation period for residential real estate is 27½ years, while the depreciation period for commercial buildings is 39 years.

4. Real Estate Appreciates in Value

Depending on the area, real estate tends to appreciate – depending on local demand levels. This can vary substantially within even a short distance, but if you choose property carefully, it can appreciate quite substantially over a long period of time. Also, if you are good at fixing up real estate, doing so may trigger a substantial increase in property value.

DISADVANTAGES OF REAL ESTATE INVESTING

Real estate investing can be a highly profitable activity for many people. Despite the positives, there are few disadvantages to be aware of before investing in real estate. It is also possible to go wrong in this area and lose your investment. Some of them are significant enough to keep you from proceeding. They are noted below.

Despite the positives just noted, there are a few disadvantages to be aware of before investing in real estate – some of them significant enough to keep you from proceeding. They are noted below.

1. Real Estate Income Can Be Variable

You may lose money in some periods. This is especially likely when only a small down payment was made, resulting in larger mortgage payments. Also, in periods when demand is soft, a property may not be rented at all or it will not be possible to raise the rental rate as much as you would like. This is especially the case if you have acquired property in an area with fundamental weaknesses, such as a reliance on one local employer that subsequently closes and lays off its employees.

2. Real Estate Requires Maintenance

There may be times when unexpected maintenance issues arise, such as a failed water heater or a leaky roof. The associated repair or replacement costs may be substantial, and could wipe out your cash reserves. This can come as a particular surprise when the home inspection on a recently acquired property did not spot the issue.

3. Real Estate Requires Your Time

Investing in real estate requires a significant amount of time. You will need to spend time learning about the neighborhoods in which you want to invest, identifying problems with prospective investment opportunities, and dealing with maintenance issues. It is possible to hire a property manager to deal with tenants, but dealing with the property manager will still require a certain amount of time.

4. Real Estate Transaction Costs are High

The transaction costs associated with buying and selling properties can be quite steep. These costs, which include commissions, title insurance, loan origination fees, and a variety of closing costs, can easily wipe out the appreciation in market value of a property. These costs can only be offset by holding onto properties for an extended period of time, so that they can appreciate to a substantial degree. A large part of these costs is the real estate agent’s commission, which varies by type of property. The commission on a free-standing home is among the highest rates charged by a realtor.

General economic conditions can influence the value of real estate and a great deal of your personal time will be needed to oversee these properties, so you must be willing to grind it out over a long period of time in order to realize the benefits of real estate investing. Real estate business is pure and clean for investing purposes, if any one serves and earns commission or charge wage on it. It is permitted in islam. If you are looking for a well authorized real estate guide in Islamabad; Al-Raheem Associates is the best option.

Conclusion:

Real estate has historically been one of the best investment options available. As long as you are careful about researching your purchases and are willing to hold properties for an extended period of time, there is a good chance that your investments will pay off handsomely.

Real estate business is pure and clean for investing purposes, if any one serves and earns commission or charges wage on it. It is permitted in islam. If you are looking for a well authorized real estate guide in Islamabad; Al-Raheem Associates is the best option.

visit: www.parkgreencity.com